Australian opposition focuses on policy issues

RachelPannett

(Adds comment from government)

BRISBANE -(MarketWatch) -- Australia's opposition leader, Tony Abbott, Sunday kicked off his Liberal-National coalition's official bid for office by focusing on perceived policy failures of the current government, notably a contentious government plan to tax the profits of the country's biggest mining companies.

"[Labor] is a government that's broken promises, wasted money and tried to clobber the country's most successful industry with a great big new tax," Abbott told an audience of party faithful in Brisbane, the capital of the swing state of Queensland Sunday.

"It's time to end this soap opera and give Australia back a grown-up government," he added, in reference to increasing divisions within the ruling Labor government, after former leader Mark Latham confronted Prime Minister Julia Gillard on the campaign trail Saturday.

The incident further inflamed tensions within the Labor government which is already struggling to shake off the political baggage from its decision to dump Kevin Rudd as leader just over six weeks ago, partly in response to fears a public and industry backlash over its mining tax proposal was damaging its electoral chances.

The coalition policy launch, the major setpiece of the five-week campaign, comes as polls show Abbott's center-right coalition has a realistic chance of ousting the center-left Labor government from office Aug. 21 after just one term.

A Nielsen poll, published in the Age newspaper Saturday, showed the Liberal-National coalition holds a 51% to 49% lead over Labor--the third voter survey in a week to put the coalition in front less than two weeks out from polling day.

Abbott named abolishing the mining-profits tax, tackling illegal immigration, direct action on climate change and debt-reduction his priorities, if elected.

Labor announced plans in early May to levy a new 40% tax on mining-company profits, later softening the headline rate to 30% in a deal brokered by Gillard with major mining companies BHP Billiton Ltd. (BHP.AU), Rio Tinto Ltd. (RIO.AU) and Xstrata PLC (XTA.LN) following Rudd's June 24 ouster.

The coalition describes the tax proposal as robbing the "golden goose" that helped the resource-rich economy avoid a recession last year.

Labor thought the proposal would be popular with workaday Australians, redistributing proceeds from the booming mining industry and helping avoid what economists describe as a "two-speed economy" where strong growth, buoyed by commodities exports, drives up interest rates and the exchange rate, making it harder for other sectors like manufacturing to compete.

But the tax was vigorously opposed by major mining companies and industry lobbyists, who described it as an attempt to nationalize the mining sector.

"If Australia used to ride on the sheep's back, it leans on the miner's shovel today," Colin Barnett, Liberal premier of Australia's resource-rich Western Australia state, said at the coalition campaign launch Sunday.

"Why would you attack and undermine the standing, the international confidence, financial confidence in this great mining industry"? he asked.

Labor's new deal has proved unpopular with the nation's smaller mining companies, including iron-ore group Fortescue Metals Ltd. (FMG.AU), which fear the plan will favor the three big mining companies. Rio Tinto Chief Executive Tom Albanese said he has enough comfort with the revised tax plan to push ahead with massive expansion and investment plans in the country.

"It's not perfect, but I would say it's something that allows Rio Tinto to make the investments that we want to make in Australia," Albanese told the Sky Business channel's "Sunday Business" television program.

Meanwhile, Abbott said if elected, the coalition would also begin talks with the tiny Pacific Island nation of Nauru on establishing an offshore refugee-processing center, legislate tougher penalties against people smugglers and establish a debt-reduction task force.

Australia was one of few developed countries to sidestep a recession last year, with net debt projected to peak at a relatively low 6% of national product and an unemployment rate of just 5.1%, in part due to Labor's swift fiscal stimulus response.

But the coalition argues the Labor government's A$70 billion-plus stimulus package was too large and led to waste and cost overruns in school-building and home-insulation programs.

Gillard on Sunday urged Australians to judge her Labor government on its economic track record, where, under Labor's watch, Australia has the lowest unemployment compared to all of the major advanced economies coming out of the global financial crisis, core inflation is lower now than when Labor came to office and official interest rates are 2.25 percentage points lower than at the peak under the previous Howard government, of which Abbott was a senior member.

"We've got stronger economic growth coming out of the global financial crisis than other major advanced economies and none of the other major advanced economies avoided recession and we did," Gillard told reporters in Darwin.

The coalition said Sunday it would release the modeling behind a root-and-branch review of Australia's tax system by Treasury Secretary Ken Henry, with fairer personal taxes at the top of the party's tax agenda.

Still, Abbott noted tax overhaul will be "harder to pursue" with a budget deficit expected to reach A$40.4 billion this fiscal year than when the budget was in surplus.

Like Labor before him, Abbott may also find his promises--outlined in a three-month "action plan" Sunday--could prove harder to implement in government than they appear in opposition.

Labor swept to office in 2007 with an ambitious agenda, including plans for a national high-speed Internet network and emissions-trading plan to green up the economy. Both plans faced opposition in a hostile upper house Senate.

Neither side is likely to control the Senate outright after the coming election, with the balance of power likely to be held by the environmentalist Greens party.

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